Force Majeure Notices: How Much Detail is Required?
While re-reading the MUR Shipping v RTI Ltd cases for a talk on geopolitical risk, I noticed an oft-missed detail that now takes on a much greater importance in the present climate: how much detail is needed in a force majeure notice?
Of course, at the end of the day, a force majeure clause is a creature of contract. The parties must first and foremost look at the wording of the force majeure clause as to the necessary requirements and level of detail needed.
But all too often, a force majeure clause simply obliges the invoking party to give “details” of the force majeure event. In such a case, how much detail does the party have to give? This was the question facing Jacobs J in MUR Shipping v RTI Ltd [2022] EWHC 467 (Comm).
Under the force majeure clause in MUR Shipping, a party wishing to invoke it had 48 hours to serve a force majeure notice. The force majeure notice had to, inter alia, include “details” of the said force majeure event (at [19]).
“36.4. A Party wishing to claim force majeure in respect of a Force Majeure Event must give the other Party a Force Majeure Notice within 48 hours (Saturdays, Sundays and holidays excepted) of becoming aware of the Force Majeure Event. Such Force Majeure Notice shall be a notice in writing which:
a) sets out or attaches details of the Force Majeure Event, and
b) states that the Party giving the Force Majeure Notice wishes to claim force majeure in respect of such Force Majeure Event.
c) give reasonable estimated duration of the Force Majeure Event to the extend [sic] it is reasonably possible to do so at the time of giving the Force Majeure Notice.”
After the force majeure event arose, MUR Shipping then served a force majeure notice in the following form within 48 hours (at [26]).
“MUR were sorry to note that guarantors UC Rusal have been placed on the OFAC SDN list, and that as Charterers RTI are a subsidiary of UC Rusal, Charterers are similarly to be treated as if they are named on the list.
…
Having reviewed the effect of these sanctions and General License 12 we note that, subject to the terms of that license, it would be a breach of sanctions for Owners to continue with the performance of the COA. For contracts entered into prior to 6 April 2018, General License No. 12 provides that performance until 5 June 2018 is permitted but only to the extent that it is "ordinarily incident to and necessary to the maintenance or wind down of operations, contracts ... " etc, to do so. It is not "necessary" for MUR to load any further cargoes under the COA and it would therefore be a breach of sanctions if MUR were to do so. MUR's present intention is to however continue with the transportation of Charterers' cargoes that have already been loaded as detailed above, provided that this can be done without breaching sanctions.
We further note that the sanctions will prevent dollar payments, which are required under the COA.
Therefore, as a result of the sanctions placed on Charterers and guarantors, we are left with no option but to claim force majeure in accordance with clause 36 of the charterparty and this notice will have to remain effective for as long as the sanctions remain in place, or unless it is possible to obtain relief from sanctions which we will investigate."
RTI Ltd argued both in arbitration and in the High Court that the force majeure notice was defective in that it did not give sufficient “detail” as to the force majeure event. In particular, it was argued that the force majeure notice did not “spell out” how the prevention of US dollar payments, in consequence of the sanctions, would impact upon loading and discharge (one of the requirements for a force majeure event – clause 36.3).
This argument was rejected by Jacobs J. In his Lordship’s view, a force majeure notice need not contain or be equivalent to a “detailed legal submission”. The notice simply had to be objectively clear that the sender was saying the requirements of the force majeure clause were satisfied - which was made out in this case (at [188]).
Two pertinent remarks on the level of “detail” required for a force majeure notice:
- The purpose of a force majeure notice is to allow the receiving party to investigate the said force majeure event at the relevant time. This allows the receiving party to challenge whether the said force majeure event does prevent performance or delay in performance; or alternatively allow the receiving party to consider if there are other means of enabling performance to be continued (Mamidoil-Jetoil Greek Petroleum v. Okta Crude Oil Refinery [2003] 1 Lloyd’s Rep 1 at [134]). It follows that a level of detail allowing the receiving party to undertake such investigations would often be sufficient.
- The requisite amount of detail may depend on the length of time within which the force majeure notice had to be served. When this had to be done within a “short time-frame”, such as within 48 hours (as in MUR Shipping), a Court would not expect the same level of detail compared to when a longer period is afforded (e.g. as soon as reasonably practicable) (at [188]).
Parties can therefore take comfort that short of the force majeure notice omitting a stated contractual requirement or merely containing a bare reference to said force majeure event, a Court is unlikely to be sympathetic to arguments that the force majeure notice did not contain sufficient detail.
This represents the Court’s last word, at least for now, on the matter. It was just a shame this question did not benefit from further guidance from the Court of Appeal or Supreme Court, in light of its growing relevance in the present geopolitical climate.
The material is based upon the law of England and Wales and does not constitute advice. Detailed professional advice should be obtained before taking or refraining from taking action in relation to this material.
